Thunderbird Entertainment Group Inc. Management’s Discussion and Analysis

For the three months ended September 30, 2023 (“Q1 2024”) and September 30, 2022 (“Q1 2023”)

GENERAL

This Management’s Discussion and Analysis (“MD&A”) dated November 28, 2023 should be read in conjunction with the unaudited interim condensed consolidated financial statements of Thunderbird Entertainment Group Inc. (“Thunderbird” or the “Company”) for the three months ended September 30, 2023 and 2022 and accompanying notes (the “Financial Statements”) that have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The Company operates on a fiscal year that ends June 30.

Thunderbird is incorporated under the Business Corporations Act (British Columbia). Thunderbird’s principal operating subsidiaries are Great Pacific Media Inc. (“GPM”), Atomic Cartoons Inc. (“Atomic”), and Thunderbird Productions Inc. In accordance with industry practice, Thunderbird incorporates a new subsidiary corporation for each production, including each new season of ongoing series productions. Accordingly, Thunderbird has approximately 75 such subsidiary corporations.

The Company’s common voting shares are traded on the TSX Venture Exchange (“TSXV”) under the ticker “TBRD” and the OTCQX® Best Market under the symbol “THBRF”.

Unless otherwise indicated, all dollar amounts are expressed in thousands of Canadian dollars.

This MD&A refers to certain financial measures that are not determined in accordance with IFRS. Although these measures do not have standardized meanings and may not be comparable to similar measures presented by other companies, these measures are defined herein or can be determined by reference to Thunderbird’s Financial Statements. The Company discusses these measures because it believes that they assist the reader in better understanding operations and key financial results.

FORWARD-LOOKING STATEMENTS

Thunderbird’s public communications may include written, or oral “forward-looking statements” and “forwardlooking information” as defined under applicable Canadian securities legislation. To the extent any forward-looking information in this MD&A constitutes “financial outlooks” or “future-oriented financial information” within the meaning of applicable Canadian securities laws, the reader is cautioned not to place undue reliance on such information. All such statements may not be based on historical facts that relate to the Company’s current expectations and views of future events and are made pursuant to the “safe harbour” provisions of applicable securities laws.

Forward-looking statements or information may be identified by words such as “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “plan”, “project”, “should”, “believe”, “intend”, or similar expressions concerning matters that are not historical facts. These statements represent management’s current beliefs and are based on information currently available to management and inherently involve numerous risks and uncertainties, both known and unknown.

Forward-looking statements in this document include, but are not limited to, the Company’s desire to be a purposeled, people-first, net positive company; growth through developing long-term value through the expansion of its programming library and leveraging its owned or controlled IP, programming that can drive multiple revenue streams; Thunderbird Brands contributing to the Company’s intention to build out its slate of owned intellectual property (“IP”) including cross media exploitation and its intention to acquire and distribute premium third-party titles; build out its slate of owned IP including cross-media exploitation; Thunderbird’s intention to continue to be a premium content supplier for leading Internet over the top (“OTT”) platforms, which will continue to order premium quality content over quantity; the belief that focusing on higher budget and quality programs will extend the life and increase the value of the Company’s library; Thunderbird’s ability to use production service work to further leverage future proprietary productions and strengthen Thunderbird’s business relationships with key North American and international broadcasters and other clients; opportunities to maximize shareholder value; the proposed changes to the composition of the Board pursuant to the A&R Cooperation Agreement (as defined below); evaluating unsolicited inbound expressions of interest received by the Company, the potential sale of Thunderbird and proactive engagement with any such opportunity; strategic initiatives materializing; greenlit animated IP projects

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contributing to net income starting in fiscal 2025; forecasted growth in revenue and AEBITDA; the slowdown in greenlights impacting the Company’s outlook; the proposed NCIB (as defined below) and additional details being announced in a subsequent news release; production of a multi-category toy line for all distribution channels; plans for global distribution sales and mass market licensing of Mermicorno: Starfall to come to fruition; the potential for results of operations to fluctuate significantly from period to period; the Company’s expectation that liquidity needs for the next twelve months will be met; management continuing to pursue sources of debt or equity financing to develop and produce film and television properties and facilitate strategic acquisitions as considered necessary; the possibility that shareholders will convert their preferred shares into common shares at a ratio of 3:1 or redeem their shares; and the Company’s objectives, goals or future plans and the business and operations of the Company.

Financial outlook and future-oriented financial information, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks. The targets included herein, and the related assumptions, involve known and unknown risks and uncertainties that may cause actual results to differ materially. The purpose of the information is to provide readers with a more complete perspective on the Company’s anticipated future operations and business activities. Readers are cautioned that the information may not be appropriate for other purposes. While management of Thunderbird believes there is a reasonable basis for these targets, such targets may not be met. The Company’s actual financial position and results of operations may differ materially from management’s current expectations and, as a result, the Company’s future revenue and AEBITDA may differ materially from the financial outlooks and future-oriented information provided in this MD&A.

Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic and social uncertainties; market segment conditions; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; product capability and acceptance; international risk and currency exchange rates; and technology changes. An assessment of these risks that could cause actual results to materially differ from current expectations is contained in the “Risks and Uncertainty” section of this MD&A. The foregoing is not an exhaustive list. Additional risks and uncertainties not presently known to Thunderbird or that management believes to be less significant may also adversely affect the Company. The forward-looking statements or information contained in this document represent the Company’s views as of the date hereof and although the Company believes that the assumptions and factors used in preparing the forward-looking statements are reasonable, no assurance can be given that such events will occur in the disclosed time frames or at all. The Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements or information.

RISKS AND UNCERTAINTIES

The Company is exposed to several specific and general risks that could affect the Company that each reader should carefully consider. Additional risks and uncertainties not presently known to the Company or that the Company does not currently anticipate will be material, may impair the Company’s business operations and its operating results and as a result could materially impact its business, results of operations, prospects, and financial condition. For further details see the Forward-Looking Statements section in this MD&A and the “RISKS AND UNCERTAINTIES”, contained in Thunderbird’s MD&A, for the years ended June 30, 2023 and 2022, filed October 4, 2023, on www.sedar.com.

BUSINESS OVERVIEW

Thunderbird is a global award-winning, full-service, multi-platform media production, distribution and rights management company headquartered in Vancouver, Canada, with additional offices in Los Angeles and Ottawa. Thunderbird’s programs cover multiple genres with a significant focus on children’s productions, scripted comedy, scripted drama, and unscripted (factual) content. Thunderbird also has a team dedicated to global distribution and consumer products. Thunderbird’s productions are currently being broadcast via conventional linear means, and on several digital platforms, in more than 200 territories worldwide.

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Thunderbird prides itself on the Company’s culture of excellence, one that prioritizes integrity, acceptance, and flexibility as core values. As part of the Company’s mission to create content and build global brands that are awardwinning, entertaining, and made with integrity, Thunderbird also fosters artist-driven working environments rooted in kindness, creativity, and acceptance. The Company does this by prioritizing the needs of its team, and by elevating diversity and inclusivity both on-screen and off.

Across the Company, Thunderbird employees and crew members represent myriad backgrounds, cultures, countries, and beliefs, under a collective goal of creating content that enriches and entertains universally. This focus has also received recognition within the entertainment and business industries. Most recently, Thunderbird was included on Report on Business Magazine’s 2023 Women Lead Here list, Atomic received a third ranking on Business in Vancouver’s list of the biggest digital arts companies in B.C., and GPM was named to Realscreen’s Global 200 list, for the 11^th consecutive year. Previous awards include Thunderbird being named as a leading company in the diversity and inclusion category by BC Business magazine (2021), and series Molly of Denali receiving awards such as the National Association for Multi-ethnicity in Communications (NAMIC) Vision Award in animation (2022), a Best Inclusivity Kidscreen Award (2021) and a George Foster Peabody Award (2020). Thunderbird attributes the Company’s growth and success to its teams.

Thunderbird’s premium content also incorporates the Company’s strong diversity and inclusion mandates and its mission of telling uplifting and underrepresented authentic stories. With quality as its North Star in a growing industry, Thunderbird recognizes that only premium content will stand out in a fiercely competitive marketplace.

In 2020, during the global pandemic, Thunderbird remained operational and maintained all production deliverables with team members working from home. COVID-19 intensified the demand for content, and with team members working from home, Thunderbird was able to scale up accordingly. The pandemic transformed business operations as the Company is no longer constrained by geographic location or studio space. Thunderbird now has a hybrid working structure, which allows it to adapt to production demands.

In fiscal 2023, Thunderbird also began development of a robust environmental, social, and corporate governance (“ESG”) action plan and roadmap to reflect the Company’s desire to be a purpose-led, people-first, net positive company. While this is a long-term initiative, Thunderbird has already taken significant steps forwards, including the appointment of a dedicated sustainability-focused role within the organization, carbon tracking and reduction targets, establishing Atomic as a registered Benefit Corporation, exploring sustainability in storytelling initiatives and extensive engagement with buyers and funders on upcoming sustainability disclosures. The Company is currently working on partnerships with B Labs (U.S.), Reel Green (Creative BC), the Canadian Media Producer’s Association, and more.

Some of this critical – and ongoing work – was recently underscored with Molly of Denali being recognized by Fast Company for being a catalyst for climate change conversations with young children and their families, and Reginald the Vampire (Season 2) being awarded an Environmental Media Association Gold Seal for its dedication to sustainability.

STRATEGY

Owned and Controlled IP

Thunderbird’s strategy is to intentionally grow the Company and its brands by developing long-term value through the expansion of its programming library and leveraging its owned or controlled IP.

While Thunderbird generates fee income during the production and initial distribution windows for its programs, one of the Company’s main objectives is to create long-term value with programming that can drive multiple revenue streams. This involves developing and owning content that has established brand recognition, which in turn helps generate a broad array of revenue streams from licensing, such as merchandise, music, video games and other ancillary sources over an extended period.

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In June 2023, Thunderbird formalized its consumer products and licensing operations under a new Thunderbird Brands banner, debuting four properties at Licensing Expo: Mermicorno: Starfall , Highway Thru Hell, The Last Kids on Earth, and Mittens & Pants (a Thunderbird acquisition) . This team intends to build out its slate of owned IP including cross-media exploitation and will also acquire and distribute premium third-party titles.

Diversified Portfolio

Thunderbird develops and produces content for several genres, including kids & family, unscripted and scripted.

Kids & family programming has been and continues to be an important and growing component of Thunderbird’s production slate and proprietary library. Through Atomic, Thunderbird’s roster of clients, customers and partners includes Netflix, Nickelodeon, PBS, Spin Master, Sony, AppleTV+, Corus, Max, Cartoon Network, Disney, Mattel, Warner Bros., Marvel, Microsoft, LEGO, Hasbro and NBCUniversal. Atomic productions include Mermicorno: Starfall, My Little Pony: Make Your Mark, Oddballs, Marvel’s Spidey and His Amazing Friends, Pinecone & Pony, Dogs in Space, Rocket Saves the Day, The Last Kids on Earth, Trolls: TrollsTopia, Molly of Denali, Curious George, LEGO Star Wars: Terrifying Tales, LEGO Jurassic Park: The Unofficial Retelling, LEGO Marvel Avengers: Code Red, Young Love , Princess Power and CoComelon Lane .

Thunderbird also remains a dominant player in the unscripted marketplace. For example, through GPM, the Company produces Highway Thru Hell which chronicles the action-packed world of heavy rescue towing, airs on Discovery Canada and is distributed in more than 190 territories worldwide, including The Weather Channel in the U.S. Highway Thru Hell is one of the longest-running, unscripted series in Canada, with Season 12 premiering in August 2023. The longevity of the series underpins Thunderbird’s reputation for developing quality content.

GPM is also the production company behind Reginald the Vampire, a fully owned scripted series that stars SpiderMan’s Jacob Batalon. Reginald the Vampire (Season 1) was picked up in a straight-to-series 10-episode order by SyFy and is co-produced with Modern Story Company and December Films. Hulu and Amazon Prime Video picked up the series for their streaming services in selected territories, and Season 1 debuted on both platforms in October 2022. This series has been renewed for a second season, with production wrapping in fiscal 2023. Cineflix Rights is an exclusive worldwide distribution partner. Boot Camp is another scripted GPM production. The film adaptation stars Drew Ray Tanner ( Riverdale ) and is based on the popular Wattpad story by Gina Musa of the same name.

GPM also works in partnership with Wapanatahk Media, a production company headed by Indigenous producers Tania Koenig-Gauchier and Shirley McLean, to develop content focused on authentic Indigenous characters and stories. Wapanatahk Media currently produces Wild Rose Vets (formerly known as Dr. Savannah: Wild Rose Vet) , a series that chronicles the unique journeys of Indigenous women navigating the triumphs and challenges of working with animals while also exploring their rich heritage and cultural ties. This series airs on APTN and Blue Ant Media’s Cottage Life channel.

Thunderbird fully owns the award-winning comedy series Kim’s Convenience, which is currently available on Netflix worldwide. The show has worldwide distribution through a mix of streaming, cable and VOD partnerships in Asia. In 2022, FilmRise, a New York-based streaming service, acquired the FAST (free ad-supported streaming TV services) rights to Kim’s Convenience , making it Thunderbird’s first production to be featured on a FAST channel. Strays , a scripted spin-off of Kim’s Convenience, had two seasons, both airing on CBC. Kim’s Convenience and Strays also recently debuted on the CBC Comedy FAST channel.

Recognizing the opportunity to further expand into the scripted genre, Thunderbird established a dedicated scripted team based in Los Angeles. Thunderbird’s scripted team has 20 scripted projects in active development, two of which are in active networking development.

Thunderbird’s Library

A substantial and growing portion of Thunderbird’s programming library has been licensed directly to leading Internet OTT platforms such as Netflix, Hulu, Amazon and iTunes, which offer subscription video on demand, transactional video on demand and advertising video on demand to their customers. Thunderbird intends to continue to be a premium content supplier for these platforms.

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Thunderbird continues to focus on higher budget and higher quality programs as management believes this increases the value and lifespan of its library. Thunderbird maintains a disciplined approach to acquiring and perfecting key exploitation rights to its content and strives to own the majority of the ancillary rights to its IP. The Company also plans to continue growing its business and library through the acquisition of complementary productions, and through strategic business alliances, both in North America and internationally.

Service Production Work

While Thunderbird’s primary focus is on producing programming in which the Company holds long-term proprietary interests, it also generates fee revenue from providing production services to a variety of clients. Service production generates near-term earnings and provides opportunities for the Company to develop its emerging talent and credentials on top brands, which can be further leveraged for future proprietary productions and strengthen Thunderbird’s business relationships with key North American and international broadcasters and other clients. Production services provide the Company with stable cashflows and help mitigate the financial statement impact of the timing of episodic IP deliveries.

COOPERATION AGREEMENT, STRATEGIC REVIEW AND NORMAL COURSE ISSUER BID

In fiscal 2023, Thunderbird was in a proxy contest with Voss Capital, LLC (“Voss”). Thunderbird entered into a cooperation agreement with Voss and certain of its affiliates on January 19, 2023, as amended January 27, 2023, which is detailed in the Company’s January 19, 2023 news release. On November 10, 2023, Thunderbird entered into an amended and restated cooperation agreement (the “A&R Cooperation Agreement”) with Voss. The A&R Cooperation Agreement amends and replaces the existing cooperation agreement in its entirety.

The A&R Cooperation Agreement, which is detailed in the Company’s November 10, 2023 news release, provides for (i) the nomination of Taylor Henderson, a representative and employee of Voss for election to the board of directors of Thunderbird (the “Board”) at the Company’s upcoming 2023 annual general and special meeting of shareholders scheduled for December 14, 2023 (the “2023 Annual Meeting”), which appointment is subject to the approval of the TSXV, and (ii) the appointment of one additional independent director to be mutually agreed by the Company and Voss following the 2023 Annual Meeting. In connection with the A&R Cooperation Agreement, Linda Michaelson and Mark Trachuk have agreed not to stand for re-election at the 2023 Annual Meeting.

Thunderbird’s Strategic Advisory Committee (“Committee”) continues to assess Thunderbird’s capital allocation strategy and all opportunities to maximize shareholder value for ultimate recommendation to the Board. This involves Thunderbird working alongside ACF Investment Bank to evaluate any unsolicited inbound expressions of interest in the Company and to handle the potential sale in the event that the Company officially goes to market.

The current macro environment has resulted in a discrepancy between Thunderbird’s internal assessment of the Company’s valuation, based on management’s line of sight on production services bookings, upcoming owned IP, and expectations for margin expansion, versus the valuation that prospective buyers might be willing to offer. As a result, the Committee has ascertained that it is in the best interests of the Company and its shareholders to wait until Thunderbird’s strategic initiatives start materializing to demonstrate its true worth. This will allow the Company to operate from a position of strength when proactive engagement ultimately commences to ensure maximum value for shareholders.

In the interim, the Board has approved the implementation of a normal course issuer bid (the “NCIB”), pursuant to which the Company may repurchase its own common shares for cancellation through the facilities of the TSXV in an amount not to exceed 10% of its public float, as may be permitted by the TSXV and applicable securities laws. Further details regarding the proposed NCIB will be provided in a news release as they become available.

OUTLOOK

Thunderbird's market strategy centers on key priorities, including the growth of core brands, substantial investments in proprietary IP, and the expansion of consistent service revenue through both established and new series. In fiscal 2023, the greenlighting of several animated IP projects set the stage for anticipated contributions to net income in fiscal 2025. Management is ambitious in their goals for fiscal 2024, targeting over 20% growth in AEBITDA¹ .

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Additionally, the Company’s current expectations are for 5% revenue growth in fiscal 24 over fiscal 2023. These projections are anchored in the completion of 43 additional hours of content delivery in the remaining months of fiscal 2024. Looking ahead, the Company aims for sustained growth with a compounded 20% increase in AEBITDA¹ forecasted through to 2026.

While navigating current industry challenges, such as cost-cutting measures from major buyers and a general slowdown in greenlighting, Thunderbird remains proactive. The Company streamlined operational processes, including reductions in travel, and entertainment expenses, as well as the elimination of certain roles. These measures were strategically implemented to address market uncertainties and create capacity for investment in growth opportunities. Thunderbird remains committed to maintaining a robust balance sheet, and to exercising prudent management decisions to stay nimble in evolving conditions while steadfastly pursuing sustainable growth.

1 AEBITDA is a Non-IFRS Measure, see “Non-IFRS Measures” section of this MD&A for its definition, detailed calculation, and detailed reconciliation.

FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR THE FISCAL FIRST QUARTER ENDED SEPTEMBER 30, 2023

• Revenue decreased from $43.7 million to $33.6 million for the three months ended September 30, 2023, as compared to the comparative quarter in the prior year, a variance of $10.1 million (23%). The decrease in revenue is primarily due to the decrease in the IP deliveries over the comparative quarter, partially offset by the increase in production services revenue.

• Free Cash Flow¹ decreased from $4.4 million to ($2.4) million for the three months ended September 30, 2023, as compared to the comparative quarter, a variance of $6.8 million (155%). The decrease for the current quarter is primarily due to the repayment of interim production financing offset by positive changes in working capital.

• AEBITDA¹ decreased from $4.1 million to $2.5 million for the three months ended September 30, 2023, as compared to the comparative quarter, a variance of $1.6 million (39%). The decrease is attributable to the reduction in IP deliveries during the quarter due to the seasonality nature of the industry.

• In Q1 2024, the Company had 30 programs in various stages of production and was working with 23 clients. Of the 30 programs in production, 10 were Thunderbird IP, and 20 were service productions. Two service productions are partner-managed, which are funded by the partner, but developed and managed by the Company with Thunderbird then entitled to receive a percentage of the net profits from merchandise and licensing.

• Thunderbird Kids & Family, producing under Atomic, was in production on 21 programs including: Princess Power (Season 2) for Netflix, CoComelon Lane for Moonbug for Netflix, Marvel's Spidey and His Amazing Friends (Seasons 3 and 4) for Disney Junior, My Little Pony: Make Your Mark for eOne/Hasbro, The Mindful Adventures of Unicorn Island for HeadSpace, Zombies: The Reanimated Series for Disney TVA, LEGO Jurassic Park: The Unofficial Retelling for NBCUniversal, and Atomic original Rocket Saves the Day , licensed to PBS KIDS, among others.

• Atomic also announced a new original one-hour special, Rocket Saves the Day , will debut on PBS KIDS in December. Rocket Saves the Day is Thunderbird IP and the Company manages and controls global media rights to this special.

• In Q1 2024, Atomic also started production on its first owned-IP adult targeted animated series.

• Thunderbird Unscripted, producing under GPM, was in production on seven programs in Q1 2024, including: Deadman’s Curse (Season 2 and 3) for History Channel, Styled (Season 2) for Hulu, Wild Rose Vets (Season 3), formerly known as Dr. Savannah: Wild Rose Vet , for APTN; Timber Titans (Season 1) for Discovery); and Highway Thru Hell (Season 12) for Discovery.

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• GPM was also in production on one scripted program, Reginald the Vampire (Season 2). NBCUniversal International Networks also acquired season two of this series, introducing it to new European markets. 6play streaming platform, owned by M6 Groupe in France, also bought the series, and it recently debuted in Canada on Bell Media’s CTV Sci-Fi channel, which acquired seasons 1 and 2.

• GPM’s companion podcast Deadman’s Curse: Slumach’s Gold received three 2023 Signal Awards: History Series (Gold); Best Writing – Unscripted (Silver), and Listener’s Choice for Best Writing – Unscripted.

• Thunderbird Distribution sold the first season of Windy Isle Entertainment’s adorable preschool series Mittens & Pants across 34 international territories. Television platforms included in this agreement are France TV, Warner Bros. Discovery’s Cartoonito, Cartoon Network and Boomerang channels (Australia, New Zealand, Southeast Asia, Hong Kong and Taiwan), Hop! Channel (Israel) and DR Denmark.

• Thunderbird Brands, together with tokidoki, announced the appointment of renowned toymaker Jazwares as global master toy licensee for Mermicorno: Starfall. The licensing program for the Thunderbird-owned IP series could include a multi-category toy line (ie. figures, dolls, playsets, vehicles, Squishmallows, costumes, musical instruments and novelty items) for all distribution channels, including mass-market, e- commerce and direct-to-consumer platforms.

• Thunderbird Distribution acquired global media and consumer products rights to new kids mixed-media series BooSnoo!, which was designed with a neurodiverse-friendly approach. BooSnoo! debuted in October 2023 at Mip junior in Cannes, France, and ranked as the sixth most-watched show among the more than 600 titles contained in the event’s screening library.

1 Free Cash Flow and AEBITDA are Non-IFRS Measures, see “Non-IFRS Measures” section of this MD&A for their respective definitions, detailed calculations, and detailed reconciliations.

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SEASONALITY

Results of operations for any period are contingent on the number and size of programs produced and/or delivered. Therefore, the Company’s results of operations may fluctuate significantly from period to period and may not be indicative of future periods. Cash flows may also fluctuate and may not be closely correlated with revenue recognition. The Company’s revenues vary significantly over the quarters as they can be driven by owned IP deliveries and license period commencement dates with the broadcasters and distributors and therefore are not earned on an even basis throughout the year. The Company is somewhat reliant on the broadcaster’s budget and financing cycles and at times the license period will be delayed and commence at a date later than originally projected. In addition, the Company delivers owned IP to OTT streaming platforms which do not have seasonal premiere calendars like traditional broadcasters. Readers of the Financial Statements and this MD&A are therefore cautioned about extrapolating the results for quarterly or annual periods in the financial quarter ended September 30, 2023, or the year ended June 30, 2023, into quarterly or annual expectations in future years.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected comparative information set out below for the three months ended September 30, 2023 and 2022 has been derived from, and should be read in conjunction with, the Company’s unaudited interim condensed consolidated financial statements and accompanying notes.

Financial Position

1 AEBITDA, AEBITDA Margin and Free Cash Flow are Non-IFRS Measures, see “Non-IFRS Measures” section of this MD&A for their respective definitions, detailed calculations, and detailed reconciliations.

Revenue

The Company has two principal revenue streams: production services and licensing and distribution. Production services revenue is earned for service work performed on projects where the Company does not own or participate

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in the IP. Licensing and distribution revenue is earned when the Company owns the copyright to a project and subsequently enters into a broadcast or distribution agreement to license the project for a specific term.

The Company recognized revenue of $33.6 million in the three months ended September 30, 2023, a decrease of 23% ($10.1 million) over the comparative quarter.

Production services revenue for the three months ended September 30, 2023 increased by 2% ($0.6 million) over the comparative quarter, due to an increase in the number and scope of contracts. This revenue consists primarily of animation production services, which experienced continued growth. The growth in production services revenue helps to reduce the volatility of results over quarters as the production service revenue is recognized as the work is completed, and the large number of contracts provides consistency in revenue flows. Projects with significant revenues during the quarter include Princess Power, Marvel’s Spidey and His Amazing Friends, LEGO Jurassic Park: The Unofficial Retelling, Zombies: The Reanimated Series and CoComelon Lane.

Licensing and distribution revenue decreased by 78% ($10.8 million) for the three months ended September 30, 2023, over the comparative quarter, due mainly to the timing of deliveries. In the current quarter, revenue was recognized from the delivery of 10 episodes of the unscripted series Highway Thru Hell (Season 12). In the comparative quarter, 6 episodes of the scripted series Reginald the Vampire (Season 1), 7 episodes of the scripted series Strays (Season 2) and 13 episodes of three unscripted series: Gut Job; Dead Man’s Curse (Season 1); and Highway Thru Hell (Season 11) were delivered.

Direct operating

Direct operating includes costs directly related to the Company’s productions, such as labour and equipment expenses on service productions, amortization of capitalized production costs, royalties and residuals on owned IP projects and participation costs for third party library product. Other includes development expenses on projects the Company has abandoned, as well as ongoing general research and scouting costs.

Direct costs for the three months ended September 30, 2023 remained consistent compared with the comparative quarter, in line with the Company’s animation production service revenue as described above in the revenue section.

Amortization of investment in content decreased 90% ($8.7 million) in the three months ended September 30, 2023 as compared to the comparative quarter, mainly due to the timing of delivery of episodes in Q1 2024 versus Q1 2023 as described above in the revenue section.

Distribution and marketing

Distribution and marketing expenses include expenses related to the distribution of the Company’s content library to third parties, investor relations, advertising and promotion, donations, attendance at forums, conferences and film markets, and the travel and meals related to such. Distribution and marketing expenses decreased by 3% for the three months ended September 30, 2023 over the comparative quarter. The decrease in the current quarter was

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mainly due to decreases in distribution costs, investor relations and attendances at conventions, partially offset by increases in travel and advertising and promotion.

General and administrative

The Company’s general and administrative expenses include salaries, contractor fees, rent, and office expenses for the Vancouver, Ottawa, and Los Angeles offices.

Total general and administrative expenses decreased 3% ($0.1 million) for the three months ended September 30, 2023 over the comparative quarter. Salaries and contractor fees increased 8% ($0.3 million) for the three months ended September 30, 2023 due to investment in the premium scripted and consumer product initiatives. Office and administrative expenses decreased 35% ($0.6 million) over the comparative quarter. This decrease is due mainly to a significant reduction in short term and cloud-based rendering contracts and related computer costs over the comparative quarter. Legal and professional fees increased $0.1 million over the comparative quarter due to professional fees related to the strategic review process.

Share-based compensation

Share-based compensation expense was $0.2 million for the three months ended September 30, 2023, consistent with $0.2 million in the comparative quarter.

Amortization

Amortization of property and equipment decreased 11% ($0.1 million) for the three months ended September 30, 2023 over the comparative quarter. This decrease is due to the transfer of assets to right-of-use (“ROU”) assets in the prior fiscal year offset by a small increase in amortization due to leasehold improvements made in the prior fiscal year.

Amortization of right-of-use assets decreased 34% ($1.0 million) for the three months ended September 30, 2023 over the comparative quarter. This decrease is primarily due to lease terminations in the current quarter and prior fiscal year offset by an increase due to the transfer of assets to ROU assets in the prior fiscal year.

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Finance costs

1Included in interest on lease obligations for the three months ended September 30, 2023 is interest related to non-finance leases of $309 (three months ended September 30, 2022 - $372).

Finance costs include interest expense, dividends and foreign exchange gains and losses on loans, net of interest income. Finance costs increased by 6% for the three months ended September 30, 2023 over the comparative quarter. The increase in finance costs for the quarter was mainly due to the increase of loan interest paid, due in part by variable interest on RBC Prime + % loans, and partially offset by interest income earned on tax credits.

Class A redeemable preferred shares receive a quarterly dividend of $0.0175 per share.

Foreign exchange (gain) loss

Foreign exchange (gain) loss includes both realized and unrealized gains and losses from foreign currency transactions. Foreign exchange loss increased by $0.5 million for the three months ended September 30, 2023 over the comparative quarter. The change in realized foreign exchange gain for the current quarter is mainly related to the receipts of U.S. dollar receivables from production service agreements with budget rates lower than the current spot rate. The change in unrealized foreign exchange loss for the current quarter is mainly due to the revaluation of foreign currency trade receivables and U.S. dollar bank balances to the current spot rate at year end.

QUARTERLY FINANCIAL INFORMATION

Note: this information was derived from unaudited interim condensed quarterly financial information.

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As discussed in the Seasonality section above, net income is substantially determined by the number and timing of programs delivered. Revenue recognized on these projects depends on contracted deliveries and license period commencement dates with the broadcasters and distributors and therefore can fluctuate significantly from quarter to quarter driving the variances in the Company’s revenue and net income/loss. While seasonality may impact owned IP project deliveries, production service revenue is recognized as the work is completed.

The decrease in net loss in the first quarter of 2024 compared to the fourth quarter of 2023 was due to a decrease in general and administration costs and amortization, partially offset by a decrease in license fee and distribution revenues, due to the timing and magnitude of IP deliveries in the current quarter, as compared to the fourth quarter.

The increase in net loss in the fourth quarter of 2023 compared to the third quarter of 2023 was the result of an increase in general and administration costs and amortization, due to timing of deliveries in the current quarter, and the delivery of fewer IP projects in the third quarter than the fourth quarter.

The increase in net loss in the third quarter of 2023 compared to the second quarter of 2023 was due to a decrease in distribution revenue, the delivery of fewer IP projects in the third quarter than the second quarter, and a slight decrease in production services revenues.

The increase in net loss in the second quarter of 2023 compared to the first quarter of 2023 was due to the delivery of fewer IP projects in the second quarter than the first quarter, offset by growth in production services projects.

The increase in net income in the first quarter of 2023 compared to the fourth quarter of 2022 was due to an increase in deliveries of IP projects in the current quarter, offset by a decrease in library revenue and a slight decrease in production services revenues.

The decrease in net income in the fourth quarter of 2022 compared to the third quarter of 2022 was due to a decrease in distribution revenue, offset by deliveries of IP projects and growth in production services projects.

The increase in net income in the third quarter of 2022 compared to the second quarter of 2022 was due to the delivery of more IP projects in the third quarter than in the second quarter, as well as due to the recording of a large distribution contract. Also, there was continued growth in production services projects.

FINANCIAL CONDITION

The above table summarizes certain information with respect to the Company’s capitalization and financial position as at September 30, 2023 and June 30, 2023.

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Total assets were $215.6 million as at September 30, 2023, a decrease of $0.3 million compared to $215.9 million as at June 30, 2023. The decrease is primarily due to decreases in cash and property and equipment, offset by increases in accounts receivable and investment in content. The decrease in cash is consistent with the decrease in interim production financing, partially offset by the increase in accounts payable. Tax credit receivables, included in accounts receivable, have increased by $5.0 million due to the timing and completion of productions. The increase in investment in content of $2.7 million is mainly due to the number and timing of deliveries of IP projects, and the related amortization.

Total liabilities were $149.0 million as at September 30, 2023, a decrease of $0.2 million compared to $149.2 million as at June 30, 2023. The decrease is mainly due to a decrease in interim production financing and lease obligations, offset by increases in accounts payable and deferred revenue. The increase in accounts payable and accrued liabilities is consistent with the increased magnitude of productions in progress. Tax credit advances payable to clients (included in accounts payable and accrued liabilities) increased $5.6 million and are related to the tax credit receivables above (the Company claims and collects tax credits on behalf of some of its clients). The decrease in interim production financing is due to repayments of $8.7 million during the quarter.

Shareholders’ equity was $66.6 million as at September 30, 2023, a decrease of $0.1 million compared to $66.7 million as at June 30, 2023. The deficit increased $0.7 million due to a net loss of $0.7 million and common shares increased $0.6 million through the exercise of stock options.

LIQUIDITY

The Company’s liquidity needs for the next twelve months are expected to be met by cash on hand, cash generated from operations and through a variety of sources including production bank loans. The Company’s management will continue to pursue further sources of debt or equity financing to continue the development and production of film and television properties and facilitate strategic acquisitions as considered necessary.

As at September 30, 2023 the Company has a cash balance of $21.9 million, as compared to cash of $25.4 million at June 30, 2023.

Net cash flows

Cash flows from operating activities in the three months ended September 30, 2023 provided cash of $2.0 million, compared to $7.2 million in the comparative quarter. During Q1 2024 cash provided by operation activities included amortization of $3.4 million, compared to $13.1 million in Q1 2023, mainly due to a decrease in amortization of investment in content and right-of-use assets, as well as a working capital inflow of $1.6 million, compared to an outflow of $7.0 million in Q1 2023, due mainly to the increase of accounts payables, timing of payments and other receipts. Cash outflows relating to investment in content included outflows of $2.4 million, compared to an inflow of $0.8 million in the comparative quarter.

Cash flows from financing activities are primarily driven by the Company’s practice to finance productions in progress by way of production bank loans secured by refundable tax credits and distribution and licensing agreements on a per production basis in addition to a general security agreement. The bank loan drawn, and interest thereon is repayable upon receipt of the respective refundable tax credits and corresponding revenues receivable. Cash flows from financing activities used $4.9 million in the three months ended September 30, 2023 as compared to $4.2

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million in the comparative quarter. The increase in cash outflows is due predominantly to loan repayments offset by the proceeds of loans.

Cash flows from investing activities pertains to property and equipment purchases. During the three months ended September 30, 2023, the Company purchased property and equipment, primarily computer equipment, totalling approximately $1.0 million as compared to $1.3 million in the comparative quarter.

The following table summarizes the Cash Available for Use¹ and Cash Required for Use in Productions¹ to the total cash and cash equivalents for the three months ended September 30, 2023 and 2022. Cash Available for Use¹ is defined as the total cash and cash equivalents of the Company less Cash Required for Use in Productions¹ . Cash Available for Use¹ funds ongoing working capital requirements, principal, and interest payments on corporate demand loans as well as ongoing development and growth efforts.

Cash Required for Use in Productions¹ is defined as cash required for the funding of productions from the development stage through to completion that is not considered by the Company to be available for other uses. This cash has been provided by buyers and third-party IP owners that have engaged the Company to produce content, as well as banks with whom the Company has contracted to provide interim production financing. The decrease in Cash Required for Use in Productions¹ from September 30, 2022 to September 30, 2023 is primarily related to cash balances maintained for animation production services contracts.

Cash and cash equivalents

1Cash Available for Use and Cash Required for Use in Productions are Non-IFRS Measures, see “Non-IFRS Measures” section of this MD&A for their respective definitions.

CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to maintain financial flexibility to pursue its strategy of organic growth combined with strategic and/or synergistic acquisitions, and to maximize the return to shareholders through the optimization of reasonable debt and equity balances commensurate with current operating requirements in addition to potentially repurchasing its own common shares pursuant to the proposed NCIB, subject to obtaining prior acceptance from the TSXV. To facilitate the management of its capital structure, the Company prepares an annual budget that is updated quarterly. The annual budget is reviewed and approved by the Board of Directors and the quarterly reforecasts are reviewed by the Board of Directors.

The Company has a credit agreement with the Royal Bank of Canada (“RBC”) which provides the Company access to funding through distinct credit facilities.

• A $5.0 million revolving term loan for bridging production financing of productions being produced prior to closing of an applicable production facility. This bears interest at RBC’s prime rate plus 1.25%, secured by a General Security Agreement, and must be repaid on the earlier of 15 days after the individual production financing close or 180 days from the first drawdown. As at September 30, 2023, the Company had drawn down $0.7 million.

• A $3.0 million revolving un-margined line of credit, bearing interest at RBC’s prime rate plus 1.25%, secured by a General Security Agreement, and repayable on demand. As at September 30, 2023, the Company had repaid the prior draws.

• A five-year $10.0 million non-revolving term loan, to be used to finance the acquisition of select media companies, at an interest rate of RBC’s prime rate plus 0.50%, secured by a General Security Agreement. Repayments include an annual cash flow sweep of 5% of Thunderbird’s EBITDA due within 120 days of the fiscal year-end. As at September 30, 2023, this facility had not been drawn upon.

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• A $40.0 million revolving production operating line of credit at an interest rate of RBC’s prime rate plus 0.5% and secured by a General Security Agreement and assignment of federal and provincial tax credits. Interest only is payable monthly in arrears with the principal repayment to be made upon the receipt of the tax credits for each single purpose production company. As at September 30, 2023, the Company had drawn down $16.8 million.

Under the terms of the RBC credit facilities, the Company is required to meet certain covenants. As at September 30, 2023, the Company was in compliance with the Debt Service Coverage covenant and the Funded Debt to Tangible Net Worth covenant, but was not in compliance with the Earnings Before Interest and Taxes (“EBIT”) to Interest Expense covenant. The EBIT to Interest Expense covenant calculated by the Company as at September 30, 2023 was a ratio of -0.10:1, while the covenant requires that it will not be less than a 2.5:1 ratio. Subsequent to the quarter end, the Company has obtained confirmation that RBC has tolerated the breach of this covenant as at September 30, 2023.

The overall strategy with respect to capital risk management remains unchanged from the year ended June 30, 2023.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Company’s financial assets and liabilities consist of cash and cash equivalents, trade receivables and other, accounts payable and accrued liabilities, interim production financing and redeemable preferred shares. The Company is exposed to credit risk, liquidity risk and market risk in the normal course of operations.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s financial risk management framework and monitors risk management activities. The Company identifies and analyzes the risks faced by the Company and may utilize financial instruments to mitigate these risks.

Credit risk

The Company is subject to credit risk with respect to cash and cash equivalents and trade receivables and other. All cash and cash equivalents balances are held at major Canadian and U.S. banking institutions. Trade receivables are mainly with Canadian broadcasters, large international distribution companies and leading OTT platforms.

The Company’s customers are considered to have low default risk and the historical default rate and frequency of loss are low, therefore the lifetime expected credit loss allowance for trade receivables is nominal as at September 30, 2023.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity is to ensure, as much as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking harm to the Company’s reputation. The Company expects to satisfy obligations through cash on hand, cash flows from operations and refundable tax credit loans (see Note 17 of the audited consolidated financial statements for June 30, 2023 for further details).

Cash outflows relating to financial liabilities

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The Company now has the option to retract the redeemable preferred shares at a value of $1.00 per share. In addition, the shareholders may now convert their preferred shares into common shares at a ratio of 3:1 or may redeem their shares at a price of $1.00 per share. The Company also pays an annual dividend of $0.07 per preferred share.

Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company’s net income and the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

i. Interest rate risk

• Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its interim production financing which bears a floating interest rate. The Company has no interest rate hedges or swaps outstanding at September 30, 2023.

• ii. Foreign currency exchange risk Foreign currency exchange risk is the risk that future cash flows will fluctuate because of changes in foreign exchange rates. The Company’s activities that expose it to currency risk involve the holding of foreign currencies as well as earning revenues and incurring expenses that are denominated in foreign currencies. The Company, from time to time, has engaged in certain foreign exchange hedging activities (foreign contracts on foreign currency client payments). There were no foreign contracts in place at September 30, 2023 (2022 - $85). The Company also mitigates its currency exchange risk by entering into natural hedges whereby foreign currency liabilities are offset by assets pledged in the same foreign currency.

TRANSACTIONS AND ACCOUNTS WITH RELATED PARTIES

At September 30, 2023, $nil (2022 - $100) was due from the Chief Creative Officer and President (Matthew Berkowitz), and $nil (2022 - $20) was payable to the Chief Financial Officer (Barb Harwood). Also at September 30, 2023, $550 (2022 - $550) was payable to the Chair and Chief Executive Officer (Jennifer Twiner McCarron).

The related party transactions are made on terms equivalent to those that prevail in arm’s length transactions. All outstanding balances at the quarter-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

Key management personnel compensation

Key management includes directors and former directors, as well as the Chief Executive Officer and Chair, Chief Financial Officer, Chief Operating Officer, General Counsel and Corporate Secretary (Sarah Nathanson), and Chief Creative Officer and President. The remuneration of directors and officers is as follows:

SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of the consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and for the periods presented. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to financial statements, have been set out in note 3 of Thunderbird’s audited consolidated financial statements for the year-ended June 30,

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2023, filed on www.sedar.com. Actual results may differ materially from these estimates (refer to page 1 of this MD&A for more information regarding forward-looking statements).

SIGNIFICANT ACCOUNTING POLICIES

The Company’s critical accounting policies and estimates are disclosed in the “Significant Accounting Policies” note 3 in the Annual Financial Statements for the year ended June 30, 2023.

NON-IFRS MEASURES

In addition to the results reported in accordance with IFRS, the Company uses various non-IFRS financial measures which are not recognized under IFRS, and therefore do not have standardized meanings prescribed by IFRS, as supplemental indicators of our operating performance and financial position. The Company’s method of calculating such financial measures may differ from the methods used by other issuers and, accordingly, our definition of these non-IFRS financial measures may not be comparable to similar measures presented by other issuers. These non-IFRS financial measures are provided to enhance the user’s understanding of our historical and current financial performance and our prospects for the future. Management believes that these measures provide useful information in that they exclude amounts that are not indicative of our core operating results and ongoing operations and provide a more consistent basis for comparison between periods. The following discussion explains the Company’s use of EBITDA, AEBITDA, Free Cash Flow, AEBITDA Margins, Cash Available for Use, and Cash Required for Use in Productions, and provides reconciliations to the most directly comparable financial measures under IFRS.

“EBITDA” is calculated based on net income before interest, income taxes, and depreciation and amortization.

“Adjusted EBITDA” is calculated based on EBITDA before share-based compensation, unrealized foreign exchange gain/loss and items of an unusual or one-time nature that do not reflect our ongoing operations. EBITDA and AEBITDA are commonly reported and widely used by investors and lenders as an indicator of a company’s operating performance and ability to incur and service debt, and as a valuation metric. Refer to section “Non-IFRS Measures Reconciliations” below of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which is net income.

“Free Cash Flow” is calculated based on cash flows from operations, purchase of property and equipment and net interim production financing. Free Cash Flow represents the cash a company generates after accounting for cash inflows and outflows to support operations and maintain its capital assets. Refer to section “Non-IFRS Measures Reconciliations” below of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which is cash flows from operating activities.

“AEBITDA Margin” is calculated as a ratio of AEBITDA over total revenues. Margin is a non-IFRS ratio when applied to non-IFRS financial measures.

“Cash Available for Use” is defined as the total cash and cash equivalents of the Company less Cash Required for Use in Productions. Cash Available for Use funds ongoing working capital requirements, principal and interest payments on corporate demand loans as well as ongoing development and growth efforts and thus is an important liquidity measure that management uses to monitor the business on an ongoing basis. Refer to section “Non-IFRS Measures Reconciliations” below of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which is cash.

“Cash Required for Use in Productions” is defined as cash required for the funding of productions from the development stage through to completion that is not considered by the Company to be available for other uses. The cash is not legally restricted and has not been classified as Restricted Cash on the consolidated statement of financial position. This cash has been provided by buyers and third-party IP owners that have engaged the Company to provide services, as well as banks with whom the Company has contracted to provide interim production financing. Management uses the amount of Cash Required for Use in Productions to determine the Company’s Cash Available for Use. Refer to section “Non-IFRS Measures Reconciliations” below of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which is cash.

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Non-IFRS Measures Reconciliations

The following table presents the reconciliation from net income (loss) to Adjusted EBITDA, for the three months ended September 30, 2023 and 2022.

The following table presents the reconciliation from cash flows from operations to Free Cash Flow, for the three months ended September 30, 2023 and 2022.

Summary of Cash Flows

The following table presents the reconciliation from Cash Available for Use and Cash Required for Use in Productions to Cash for the three months ended September 30, 2023 and 2022.

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DISCLOSURE OF OUTSTANDING SHARE DATA

As at November 28, 2023 the Company had the following common and preferred shares and securities convertible into common shares outstanding.

Common Shares 50,183,987 Preferred Shares – redeemable class A¹ 415,000 Stock Options 3,123,000 Restricted Share Units Equity Settled 111,960

1Preferred shares Class A are convertible into common shares at a ratio of 3:1

Directors and Officers as at September 30, 2023

Directors

Jennifer Twiner McCarron CEO, Director, Chair Mark Trachuk Lead Director Lisa Coulman Director Asha Daniere Director Azim Jamal Director Jerome Levy Director Linda Michaelson Director

Officers

Jennifer Twiner McCarron CEO, Director, Chair Barb Harwood CFO Sarah Nathanson COO, General Counsel, Corporate Secretary Matthew Berkowitz CCO, President

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